As 2018 draws to a close, the U.S. is exporting an ever-larger percentage of its crude oil, natural gas and petroleum product output. More infrastructure—docks, terminals, liquefaction plants, gas storage, rail sidings, etc.—are needed to handle the tankers and pipelines used to transport these swelling volumes.
Midstream Business profiles here some of the key exporter players, five traders and five operators, whose business spans the globe. International trade takes a large chunk of their market.
According to data from the website Trading Economics, in 2017, the value of exported mineral fuels, oils and distillation products topped $200 billion—$201.65 billion, to be exact.
According to data from the U.S. Census Bureau, January- 2018 saw the nation send out more about $133 billion in seasonally adjusted total exports, which was lower than the amount of imports, but still impressive.
Europe seeks LNG, as Iran produces less oil and also exports less, and “the changing U.S. energy trade balance is still dominated by crude oil imports,” according to the U.S. Energy Information Administration.
The American Geosciences Institute reported that in second-half 2018, the U.S. exported roughly 7.6 million barrels of petroleum per day (MMbbl/d), alone, with the largest markets in Mexico and Canada and to 180 countries in all.
The fall of imports
“The recent increase in domestic oil production, especially since 2010, has had a significant impact on U.S. petroleum imports and exports. From 2005 to 2015, the U.S.’ reliance on petroleum imports fell from 60% to 25% of total consumption, while exports increased by more than 300%. Since 2015, imports have remained fairly steady at about 10 MMbbl/, but exports have continued to increase, from 4.7 MMbbl/d in 2015 to 7.6 MMbbl/d in early-mid-2018,” the institute said.
It’s no surprise that established foreign commodity traders play key roles in the U.S. export surge, thanks to their established contacts and infrastructure. The companies profiled here are all making strides in the export game. Some are busy on joint ventures (JV) constructing pipelines, others have bankrolled large export deals, and others have signed purchase and sale agreements for products.
The commodity trader, which trades petroleum products, metals and minerals, had $86.9 billion in group revenue, $52.8 billion in total assets, $657.9 million in EBITDA and $979 million in gross profit according to its mid-2018 interim financial and business highlights.
According to that report, “total volumes traded in oil and petroleum products grew by 16% from the same period a year ago to an average 5.8 MMbbl/d, while metals and minerals total volumes increased by 48%.”
CFO Christophe Salmon said, “the fall in [oil sector’s] profitability was the result of a major shift in the oil market during the period from a contango structure, where forward prices are higher than spot prices and act as an incentive to hold inventories, to the opposite condition of backwardation, where holding stocks is costly. The oil market became backwardated in October 2017 as a consequence of rising spot prices in response to production curbs by OPEC.”
According to its website, Trafigura sources its oil from public E&Ps, supermajors and national oil companies; it has a blending hub in Louisiana and has continually expanding domestic lease activity in the Eagle Ford Shale.
Trafigura is “growing business” in major importer China, but specific to LNG, is focusing on expanding its European natural gas business to cover the market there, according to the website.
Glencore, a global commodities marketer and producer, had $14.8 billion in adjusted EBITDA for 2017, more than 150 assets across more than 50 countries, according to its website. Glencore moves 6 MMbbl/d to customers, and markets gas in Europe.
As of its report at the six-month mark of 2018, Glencore had increased adjusted EBITDA by 23% to $8.3 billion, and its overall net income increased by 13%. The report notes that the company acquired “a 78% stake in ALE, Brazil’s fourth-largest fuel distributor,” in an effort mainly targeting downstream.
Geneva-based Vitol has refining, terminaling and storage and, according to its website, ships 349 million tonnes of crude oil and products annually, trades more than 7 MMbbl/d of crude and petroleum products daily, and has 250 ships transporting its cargoes, which include bitumen, naphtha, natural gas and oil, at any one time.
As of September, Vitol and Cheniere Energy Inc. signed a 15-year LNG purchase and sale agreement, under which Vitol would purchase 0.7 million tonnes per year from Cheniere Marketing on a free on board (FOB) basis, according to a press release.
According to an announcement, Russell Hardy, Group CEO at Vitol, said, “We are delighted to be working with Cheniere, a pioneer in U.S. liquefaction. Vitol is committed to the long-term development of the LNG market. We believe that LNG has an important role to play in the future energy mix and that its evolution will require a more flexible and tradeable LNG market.”
Noble Group Ltd.
Noble Group markets, processes, financially backs and transports energy assets and other commodities. Its energy assets include oil liquids, coal and LNG.
“Noble is a major participant in the global physical oil market, trading large physical volumes including crude and refined products via ship, barge, pipeline, truck and rail. Noble has blending and wholesale capabilities in North America and the Caribbean, with long-term leases on liquid storage capacity across the globe. Working with producers, consumers and refiners to manage exposures along the supply chain, we offer customers a variety of services that go beyond the traditional commodity price hedging solutions, such as structured finance solutions,” its website says.
The company says of its LNG franchise that it is built on the company’s existing relationships with Asian energy customers. Late last year, according to Reuters, the company hunted for a buyer for its LNG units “to cover debts and reduce credit exposure after a first-half loss of $1.9 billion, [according to sources.].”
The Reuters report also said that Noble, in a measure to only focus on its “core Asian coal business after a crisis-wracked two years,” [was] selling its North American gas and power business to Mercuria and also said it would sell its capital-intensive oil liquids business, leaving it focused on hard commodities.”
The Swiss-based global commodity trading house, which also has a major office in Nicosia, Cyprus, sources crude and refined products from more than 100 countries. It reported that in 2017, total trading volumes increased to 184 million tonnes from 153 million in 2016—the company noted that the calculation removes emissions, “which can cause significant swings in results.”
Revenue for 2017 was US$63 billion, up from US$47 billion in 2016, the website reported.
Gunvor opened a Houston trading office in 2017. The company’s terminals and refineries serve Europe, and its pipelines and storage mix is split between Germany (Transalpine Pipeline) and Panama. Gunvor has a minority stake in Petroterminal de Panama, with a primary asset of a pipeline with 600 Mbbl/d throughput capacity linking the Atlantic and Pacific.
“There are also storage locations at both ends of the pipeline with a total of around 9 MMbbl split approximately equally between the two coasts. The pipeline offers a shortcut for crude cargoes around Latin America and an alternative to the Panama Canal. It gives us increased sourcing opportunities, a market presence in the Americas and access to additional storage capacity,” a company profile said.
Buckeye Partners LP
No. 13 on the Midstream 50
The publicly traded MLP owns and operates global assets for the transportation, storage, processing and marketing of liquid petroleum products. According to its company profile, it has more than 135 liquid petroleum products terminals with aggregate tank capacity of more than 176 MMbbl.
In August, the company released second-quarter financial results. It had an adjusted EBITDA that was lower, at $254.9 million, than second-quarter 2017’s $269.2 million, and also a lower net income attributable to unitholders, at $91.9 million, compared with second-quarter 2017’s $112.7 million.
In late April, the company announced the formation of a JV with Phillips 66 Partners LP and Andeavor, now a part of Marathon Petroleum’s MLPX LP, “to develop a new deepwater open-access marine terminal in Ingleside, Texas. The South Texas Gateway Terminal will be constructed on a 212-acre waterfront parcel at the mouth of Corpus Christi Bay … to serve as the primary outlet for crude oil and condensate volumes delivered off of the planned Gray Oak Pipeline from the Permian Basin. The terminal … will offer 3.4 MMbbl of crude oil storage capacity, connectivity to the Gray Oak Pipeline and two deepwater vessel docks capable of berthing very large crude carrier petroleum tankers,” a press release said.
“This project expands our presence in the important Corpus Christi market, which we believe offers strong competitive advantages for waterborne shipments of crude oil and other petroleum products from the fast-growing Permian and Eagle Ford shale plays,” said Khalid Muslih, executive vice president of Buckeye and the president of its global marine terminals business unit.
Cheniere Energy Inc.
No. 10 on the Midstream 50
Cheniere operates the first large-scale U.S. LNG liquefaction project, Sabine Pass, in Cameron Parish, La., which loaded the first large-scale LNG shipment from the Lower 48 states in February 2016. Work continues on the plant, which eventually will have six liquefaction trains.
It also is moving forward on its Corpus Christi Liquefaction project on Texas’ Corpus Christi Bay, which is nearing completion and is expected to go on-stream in 2019. In September, Cheniere Energy completed a corporate roll-up with its Cheniere Energy Partners MLP unit.
It is noteworthy that in 2017, its EBITDA jumped 1077% and Cheniere zoomed from No. 40 in 2017 to No. 10 this year in the Midstream Business Midstream 50 rankings—the biggest one-year climb ever by a firm.
As aforementioned, Vitol and Cheniere recently signed a 15-year LNG purchase and sale agreement, under which Vitol would purchase 0.7 million tonnes per year from the Cheniere Marketing unit on an FOB board basis. The liquefaction project is being designed for five trains with expected aggregate nominal production capacity of up to 22.5 million tonnes per annum (mtpa) of LNG.
Enterprise Products Partners LP
No. 5 on the Midstream 50
One of the sector’s largest publicly traded partnerships, Enterprise provides natural gas treating, processing, transportation and storage for gas and NGL. It has 145.2 million barrels (MMbbl) of storage capacity in Texas storage facilities, while its next–largest capacity is 15.4 MMbbl in Louisiana; it has total capacity from facilities across the nation of 178.3 MMbbl.
The company has large ownership interests in several crude oil pipelines across the U.S.
Seeking Alpha reported in the early fourth quarter that the company “has emerged from the 2015 oil crash with best-in-class assets firing on all cylinders [and] also has a best-in-class balance sheet [with units yielding] 6%.”
The investor website also reported that Enterprise Products’ second-quarter 2018 recap recounted “19.3 million tonnes per day of propylene were produced; 1.75 MMbbl/d of NGL, crude, petchem and refined products marine terminal volumes; 927 Mbbl/d of NGL fractionation volumes and 3.41 MMbbl/d of NGL pipeline transportation volumes”—all record amounts.
EPD reported record second-quarter results with EBITDA of $1.77 billion, up from $1.37 billion in second-quarter 2017.
No. 12 on the Midstream 50
Targa describes itself as “one of the largest independent midstream energy companies in North America.” It gathers, treats and sells natural gas and provides a full range of services for NGL, crude oil and refined products across the Permian Basin, Barnett, Bakken and Eagle Ford shales, the Anadarko and Arkoma basins and onshore Louisiana and in the Gulf.
In September, the company reported that it planned to sell its refined products and crude oil storage and terminaling facilities in Tacoma, Wash., and Baltimore to an affiliate of ArcLight Capital Partners LLC for about $160 million.
Earlier in the year, Targa joined NextEra Energy Resources, WhiteWater Midstream and Marathon Petroleum’s MPLX LP to develop the Whistler Pipeline project, “which will provide an outlet for increased natural gas production from the Permian Basin to growing markets along the Texas Gulf Coast,” it announced. The 450-mile-long pipeline will transport about 2 billion cubic feet per day of gas and could be operational in fourth-quarter 2020.
Energy Transfer LP
No. 2 on the Midstream 50
In one of the latest roll-ups within the sector, Energy Transfer Equity and Energy Transfer Partners completed their merger in October. The simplified entity is now operating as a single partnership known as Energy Transfer LP.
The merger helped streamline a complex organizational structure “and improve transparency for our investors. It also helps provide the new Energy Transfer with an improved cost of capital to more easily fund robust organic growth projects and to execute on strategic opportunities,” the firm said following closure of the deal.
In September, ET joined Magellan Midstream Partners LP, and Delek US Holdings Inc. to construct the Permian Gulf Coast Pipeline, which would take crude oil from the Permian Basin to the Texas Gulf Coast.
“The 600-mile system is expected to be operational in mid-2020 with multiple Texas origins including Wink, Crane and Midland. The pipeline system will have the strategic capability to transport crude oil to both Energy Transfer’s Nederland, Texas, terminal and Magellan’s East Houston, Texas, terminal,” a press release added.
Erin Pedigo can be reached at email@example.com or 713-260-4631.
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